. Blacklisting and seizure of passports of wilful defaulters, as well as of all members on the board of directors and shareholders holding 15 percent or more shares in defaulting companies .Prohibition of transfer of property . Ban on standing for public office . Withdrawal of all state facilities

Those are just some of the actions against wilful defaulters proposed by the 2004 report, prepared by a six-member team led by then-Chairman of the National Planning Commission Shankar Sharma. Other members included the Rastra Bank governor and secretaries from various ministries. The report seemed to have been put on ice, and defaulters even held positions in the royal government.

Although the non performing loans has significantly decreased in the past year from 19 percent in 2005 to 13.8 percent in July this year, that's still more than double the acceptable level of five percent. Earlier this month, Finance Minister Ram Sharan Mahat promised that 75 of the 90 biggest wilful defaulters will soon face action, including having their passports impounded and transactions of property stalled.

That comes as good news for banks like Rastriya Banijya Bank and Nepal Bank, which have been crippled by bad loans, and hobbled in their attempts to catch the 'big fish' for the past three years. "This is a welcome move, and the only thing that can affect the big defaulters, but even then, our total non-performing assets will not be realised," says Jogendra Ghimire, corporate lawyer for Nepal Bank Limited.

Minister Mahat's announcement has been greeted with scepticism by many in the business community, who ask what purpose the sanctions will serve, if they don't provide for recovery of the loans. "Many of these acts are blackmailing, not blacklisting," says Roop Jyoti, former finance minister, vice chairman of the Jyoti Group, and a former defaulter. Jyoti argues that the report's recommendations are inconsistent. For example, 'wilful' is defined vaguely, and non-Nepali directors on the boards of defaulting companies are let off the hook.

"The proposed measures are not practical, and impounding passports of all board members is a severe measure," says Jyoti, adding, "Such penalties will make people reluctant to invest in businesses, which will have an impact on Nepal's economy."

The real problems, many in the financial sector say, go even deeper. "This is a wakeup call for the financial sector," says Siddhant Raj Pandey, executive director of Ace Finance Company. "But just blacklisting defaulters is not enough. There is so much corruption, from insider trading for loan procurements and violation of client confidentiality, to bribing judges to manipulate hearings. The crux of the problem involves the lending banks, the regulators, and the judiciary," he adds.

In the last four years, Lumbini Bank and, recently, Nepal Bangladesh Bank have been taken over by Rastra Bank because of bad loans. "The banking sector needs professional bankers, the court system needs a tuning, and along with reform of the judiciary, the regulators need to be regulated," says Bharat Raj Upreti, senior advocate at Pioneer Law Associates.

Upreti says that while stringent actions proposed against big defaulters are welcome, ultimately far-reaching consequences are best planned through insolvency law. "For a businessman to be declared personally bankrupt is political death. He can't vote, he can't stand for a public post, he will be segregated from society. No businessman in the right frame of mind will want that, so the pressure to pay up is more," he says.